Most people hope their retirement will be like a warm bath: You work your way in slowly and gradually phase down your workload. For many, however, retirement from a job is more like a cold shower—it happens all at once and not exactly as planned.

There’s lots of talk that longer, healthier lives should mean longer working lives, that “60 is the new 50.” And there are plenty of reasons to think that’s true. Beyond the financial necessity of working and saving more in order to support a longer (and, with health-care costs, more expensive) retirement, extending work also provides mental, physical, and social benefits that themselves lead to longer and more fulfilling lives.

What’s missing, however, is the legal right to transition into retirement gradually over several years. If we’re serious about a transition to working longer, there ought to be a legal framework for doing so.

Many individuals recognize the need to extend their working lives, and they’re doing it—or at least trying. In 2016, 19 percent of Americans 65 or older were working full- or part-time. Most Americans expect to join them. A recent Transamerica survey found that 53 percent of respondents plan to work past 65; thirteen percent say they’ll keep working until they die. Furthermore, for many people working longer is a more effective way to increase retirement income than increasing their savings rate. Of course, health issues, caregiving requirements, and the vicissitudes of life mean that many of these plans don’t work out.

Many who do keep working find that it’s in a different job with a different employer, often with part-time hours that they don’t control—and at lower wages. We’ve all heard stories about older workers who start driving for Uber or greeting shoppers at Walmart.

If we’re serious about a transition to working longer, there ought to be a legal framework for doing so.

Employers say they are on the “work longer” bandwagon, but too often that’s only rhetoric. A companion survey by Transamerica found that 74 percent of employers expect their employees to work in retirement, and 82 percent support the re-definition of “retirement.” Employers also report positive perceptions of older workers. They say older workers are “wiser, more reliable and responsible,” and “more effective at mentoring and training.”

In practice, however, studies routinely find bias against aging workers. Some argue that this is justified and point to higher employee-benefit costs. For example, under most health insurance programs, older workers cost more and have more health-related absences. Others point to a concern that, without a fixed retirement age, it’s hard to remove substandard employees. (Interestingly, one study of the University of North Carolina found that both faculty members and the university were better off, because low-performing faculty started the phase-down more quickly.)

But it’s easier to measure the costs of older workers than the benefits of having them. Those benefits are significant. They range from reduced turnover and onboarding costs to quicker productivity gains for younger workers through formal mentoring programs.

The most important question, however, is especially hard to measure: Are older workers less or more productive than younger ones? There are some intriguing studies suggesting that, at least in some circumstances, older workers may be more productive. One carefully researched study involving physical laborers at a European truck manufacturing plant found no loss of productivity among older workers; in fact, productivity increased until age 65. It turned out that, although older workers were slower, they made fewer serious mistakes. It’s also worth noting that hourly wages, a basic measure of productivity, are not only higher for older workers than younger, but the pay premium is increasing.

Employers may think they value experienced workers, but most don’t act like it. Only 20 percent offer any type of formal phased retirement program, and the majority have no plans to consider one in the future. Instead, most companies offer only one choice — continued full-time work or full retirement with no work at all. Clearly, if people are going to work longer, they’ll need other options.

Governments in some other countries have already acted. Japan and Singapore, where aging populations are already putting more pressure on economic growth, have enacted their own phased retirement programs. In Japan, where the mandatory retirement age, once 55, is now 60 and possibly moving to 65, the Continuous Employment Policy launched in 2013 provides workers guaranteed employment with their existing employer until age 65. Employees officially “retire” from the company at age 60 and then negotiate a new employment contract. Employees incur a 27 percent pay and benefits cut on average in exchange for 5 more years of guaranteed employment.

Singapore has taken a similar approach, offering employees who turn 62 the option to remain with their companies for an additional five years. Single-year re-employment contracts are renewable until 67. Employers aren’t obligated to offer this program, but, if they don’t, they must either transfer the employee’s contract to another employer (pending employee consent) or provide the employee a one-time lump-sum payment equal to 3.5 months current salary. In addition, when employees reach 65, employers can receive a 3 percent wage offset from the Singaporean government, incentivizing even longer employment.

However, even if some of these proposals are eventually adopted and the current economic penalties associated with older workers are reduced, something more may well be needed: a legal requirement that, unless it’s demonstrably infeasible, large employers offer phased retirement.

Here’s how such an approach might work in the U.S.: The Age Discrimination in Employment Act (ADEA) could be amended with a provision stating that failure to offer phased down part-time employment prior to full retirement could, in certain circumstances, be found to be age discrimination. The law would allow employers to defend against such claims by a showing that a part-time phasedown is infeasible and/or involves significant additional expense. Since ADEA applies only to organizations with more than 20 employees, most small businesses would be exempt.

Increased longevity can bring enormous benefits to individuals and to society as a whole—but only if both individuals and institutions rethink, re-tool, and reform. Policymakers can and should help, but they must overcome outdated attitudes about aging. Other countries have already started. The U.S. should join them.

The authors did not receive any financial support from any firm or person for this article or from any firm or person with a financial or political interest in this article. They are currently not an officer, director, or board member of any organization with an interest in this article.

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By Joshua Gotbaum, Bruce Wolfe
Most people hope their retirement will be like a warm bath: You work your way in slowly and gradually phase down your workload. For many, however, retirement from a job is more like a cold shower—it happens all at once and not exactly as planned.
There’s lots of talk that longer, healthier lives should mean longer working lives, that “60 is the new 50.” And there are plenty of reasons to think that’s true. Beyond the financial necessity of working and saving more in order to support a longer (and, with health-care costs, more expensive) retirement, extending work also provides mental, physical, and social benefits that themselves lead to longer and more fulfilling lives.
What’s missing, however, is the legal right to transition into retirement gradually over several years. If we’re serious about a transition to working longer, there ought to be a legal framework for doing so.
Many individuals recognize the need to extend their working lives, and they’re doing it—or at least trying. In 2016, 19 percent of Americans 65 or older were working full- or part-time. Most Americans expect to join them. A recent Transamerica survey found that 53 percent of respondents plan to work past 65; thirteen percent say they’ll keep working until they die. Furthermore, for many people working longer is a more effective way to increase retirement income than increasing their savings rate. Of course, health issues, caregiving requirements, and the vicissitudes of life mean that many of these plans don’t work out.
Many who do keep working find that it’s in a different job with a different employer, often with part-time hours that they don’t control—and at lower wages. We’ve all heard stories about older workers who start driving for Uber or greeting shoppers at Walmart.
If we’re serious about a transition to working longer, there ought to be a legal framework for doing so.
Employers say they are on the “work longer” bandwagon, but too often that’s only rhetoric. A companion survey by Transamerica found that 74 percent of employers expect their employees to work in retirement, and 82 percent support the re-definition of “retirement.” Employers also report positive perceptions of older workers. They say older workers are “wiser, more reliable and responsible,” and “more effective at mentoring and training.”
In practice, however, studies routinely find bias against aging workers. Some argue that this is justified and point to higher employee-benefit costs. For example, under most health insurance programs, older workers cost more and have more health-related absences. Others point to a concern that, without a fixed retirement age, it’s hard to remove substandard employees. (Interestingly, one study of the University of North Carolina found that both faculty members and the university were better off, because low-performing faculty started the phase-down more quickly.)
But it’s easier to measure the costs of older workers than the benefits of having them. Those benefits are significant. They range from reduced turnover and onboarding costs to quicker productivity gains for younger workers through formal mentoring programs.
The most important question, however, is especially hard to measure: Are older workers less or more productive than younger ones? There are some intriguing studies suggesting that, at least in some circumstances, older workers may be more productive. One carefully researched study involving physical laborers at a European truck manufacturing plant found no loss of productivity among older workers; in fact, productivity increased until age 65. It turned out that, ... By Joshua Gotbaum, Bruce Wolfe
Most people hope their retirement will be like a warm bath: You work your way in slowly and gradually phase down your workload. For many, however, retirement from a job is more like a cold shower—https://www.brookings.edu/research/opportunity-industries/Opportunity Industrieshttp://webfeeds.brookings.edu/~/588089318/0/brookingsrss/topics/laborpolicy~Opportunity-Industries/
Fri, 14 Dec 2018 03:21:21 +0000https://www.brookings.edu/?post_type=research&p=553037

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By Chad Shearer, Isha Shah

In recent decades, technological change and the global integration it enables have been rapidly reshaping the U.S. economy. These forces have improved the potential of some individuals to thrive, but diminished prospects for others striving to reach or maintain their place in the American middle class. Amid these changes, how and where will individuals find durable sources of good jobs?

Certainly, education is an important part of the picture, particularly for enabling upward mobility among young people. But tens of millions of adults who are already a critical part of the American workforce also deserve a chance to obtain better jobs, with higher pay and benefits.

This report shows that the industrial structure and growth of metropolitan economies—in particular, whether they provide sufficient numbers of jobs in opportunity industries—matters greatly for workers’ ability to get ahead economically. It examines the presence of occupations and industries in the nation’s 100 largest metropolitan areas that either currently or over time provide workers access to stable middle-class wages and benefits, particularly for the 38 million prime-age workers without a bachelor’s degree.

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By Chad Shearer, Isha Shah
In recent decades, technological change and the global integration it enables have been rapidly reshaping the U.S. economy. These forces have improved the potential of some individuals to thrive, but diminished prospects for others striving to reach or maintain their place in the American middle class. Amid these changes, how and where will individuals find durable sources of good jobs?
Certainly, education is an important part of the picture, particularly for enabling upward mobility among young people. But tens of millions of adults who are already a critical part of the American workforce also deserve a chance to obtain better jobs, with higher pay and benefits.
This report shows that the industrial structure and growth of metropolitan economies—in particular, whether they provide sufficient numbers of jobs in opportunity industries—matters greatly for workers’ ability to get ahead economically. It examines the presence of occupations and industries in the nation’s 100 largest metropolitan areas that either currently or over time provide workers access to stable middle-class wages and benefits, particularly for the 38 million prime-age workers without a bachelor’s degree.
Click here to download detailed data for metro areas »
Interactive by Alec FriedhoffBy Chad Shearer, Isha Shah
In recent decades, technological change and the global integration it enables have been rapidly reshaping the U.S. economy. These forces have improved the potential of some individuals to thrive, but diminished prospects ... https://www.brookings.edu/opinions/disability-insurance-a-crisis-ends-but-problems-persist/Disability insurance: A crisis ends, but problems persisthttp://webfeeds.brookings.edu/~/585167290/0/brookingsrss/topics/laborpolicy~Disability-insurance-A-crisis-ends-but-problems-persist/
Wed, 12 Dec 2018 17:41:01 +0000https://www.brookings.edu/?post_type=opinion&p=552624

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By Henry J. Aaron

Just three years ago in 2015, the Social Security Disability Insurance (DI) program was in a financial nose-dive. Current revenues covered only about 80 percent of outlays. Scheduled benefits could be paid only by drawing down reserves that the Social Security Administration (SSA) had accumulated earlier when revenues exceeded outlays. But calamity loomed. Reserves were projected to be depleted late in 2016, at which point 11 million DI beneficiaries faced benefit cuts of nearly 20 percent. As a stop-gap measure Congress in late 2015 temporarily increased the share of the Social Security payroll tax revenue going to the DI trust fund. That move delayed insolvency, but only until 2022 according to official projections made at the time.

Threatened benefit reduction was not the only problem. The number of DI applications had more than doubled between 1999 and 2010 for a number of reasons. Two recessions boosted unemployment, and elevated unemployment leads to an increase in DI applications. The recessions also eroded revenues. A growing number of women had accumulated enough earnings credits to be eligible for benefits. Past legislation raised the ‘full retirement age’ when DI benefits convert automatically to retirement benefits. And a growing share of the population was aging into their 50s and early 60s when the prevalence of disabling impairments grows. Some critics alleged that part of the reason for growing rolls was simple fraud. Quite apart from rising costs, many applicants had to wait years for final determinations on whether they met SSA’s definition of disability.

Some criticized DI because it didn’t do enough or serve all who need help. DI benefits are available only to those with established disabling conditions expected to last at least a year or result in death, but do nothing to forestall the progress of impairments before they lead to disability or to help those whose diminished earnings capacity was temporary or had whose impairments that fall short of total disability.

From one standpoint or another, many outside observers and members of Congress saw DI as ripe for reform. To others, DI was a key element of the social safety net that should be expanded and whose major problem was simply a need for more money. To some, it was both.

Three years later, the threat of trust fund depletion has receded. Official projections made in mid-2018 showed adequate funding for DI until 2032, nearly a decade beyond the previous projections. The principle reason for the improved outlook was a huge drop in applications, some an anticipated consequence of economic recovery, and some a startling surprise. Projections would have been rosier still had the Social Security actuaries been willing to assume that the application drop would endure for more than a few years, a step they decided not to take until they better understood why the flow of DI applications had slackened.

Despite the abrupt end of the 2015 funding crisis, most of the other problems with DI that existed three years ago, persist undiminished.

With respect to administration, most DI applications are handled relatively quickly, but the quarter of applicants who appeal denial of benefits must wait even longer today for a hearing before an Administrative Law Judge (ALJ) than they did three years ago and three times longer than they had to wait in 1990. SSA administrative budgets have remained stagnant even as the Great Recession and retiring baby-boomers have inflated workloads. The agency has faced problems in hiring a sufficient number of ALJs and support staff. In the wake of the recession-related bulge in applications, an avalanche of cases descended sitting ALJs with inadequate staff support, operating under clumsy and time-consuming administrative procedures.

Those applicants who appeal earlier denials encounter a cruel Catch-22. During the wait for a hearing, currently averaging about 600 days and much longer in many cases, claimants capable of working are discouraged from doing so because their applications will be automatically denied if they earn more than $1,180 a month, a sum defined, without conscious irony, as “substantial gainful activity.” As experience of the 1990s shows, shorter waiting times for hearings are possible. But materially lowering waiting times would require controversial changes in administrative procedure as well as large and costly increases in staff and budget.

Despite the abrupt end of the 2015 funding crisis, most of the other problems with DI that existed three years ago, persist undiminished.

Still, some important administrative improvements have been made. SSA has instituted additional training for ALJs and new measures of their performance in an effort to narrow the huge variation in the proportion of appeals approved by various judges. As recently as ten years ago, dozens of judges approved 90 percent of all cases they heard, although only about half were approved on average. Some ALJs heard 1,000 or more cases a year, although SSA believes that 500-700 cases is a full workload, almost certainly signaling slap-dash treatment of some appeals. SSA has worked hard and has succeeded in lowering the variation in the numbers of decisions and variation in approval rates.

Other ideas for major reform of the DI program abound. The current DI program provides cash assistance to people with established long-term disabilities, but does little to forestall the advent of disability, nothing to assist those with short term disabilities, and little to help current beneficiaries to recover. To deal with these problems, two analysts proposed pilots to generate information on how best to fill these gaps. Under one employers would be relieved of given relief from part of the DI payroll tax if they reduce disability incidence of their employees by 20 percent or more. Under a second, DI applicants found to have good recovery chances would be offered vocational and health services, a wage subsidy, and time-limited cash assistance provided that they suspend their applications. Other analysts have suggested that employers be required to provide all employees with disability insurance covering the first two years of any subsequent disability. Because premiums for such insurance would vary with the proportion of employees who become disabled, employers would have an incentive to help workers remain economically active.

The abatement—and possible disappearance—of the 2015 DI financial crisis is undoubtedly good news. It modestly lowers projected budget deficits and signals that better options than applying for DI are available for many more workers. But it pushes to the back-burner needed reforms in a program that is both a vital part of the nation’s safety-net and very much in need of improvements.

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By Henry J. Aaron
Just three years ago in 2015, the Social Security Disability Insurance (DI) program was in a financial nose-dive. Current revenues covered only about 80 percent of outlays. Scheduled benefits could be paid only by drawing down reserves that the Social Security Administration (SSA) had accumulated earlier when revenues exceeded outlays. But calamity loomed. Reserves were projected to be depleted late in 2016, at which point 11 million DI beneficiaries faced benefit cuts of nearly 20 percent. As a stop-gap measure Congress in late 2015 temporarily increased the share of the Social Security payroll tax revenue going to the DI trust fund. That move delayed insolvency, but only until 2022 according to official projections made at the time.
Threatened benefit reduction was not the only problem. The number of DI applications had more than doubled between 1999 and 2010 for a number of reasons. Two recessions boosted unemployment, and elevated unemployment leads to an increase in DI applications. The recessions also eroded revenues. A growing number of women had accumulated enough earnings credits to be eligible for benefits. Past legislation raised the ‘full retirement age’ when DI benefits convert automatically to retirement benefits. And a growing share of the population was aging into their 50s and early 60s when the prevalence of disabling impairments grows. Some critics alleged that part of the reason for growing rolls was simple fraud. Quite apart from rising costs, many applicants had to wait years for final determinations on whether they met SSA’s definition of disability.
Some criticized DI because it didn’t do enough or serve all who need help. DI benefits are available only to those with established disabling conditions expected to last at least a year or result in death, but do nothing to forestall the progress of impairments before they lead to disability or to help those whose diminished earnings capacity was temporary or had whose impairments that fall short of total disability.
From one standpoint or another, many outside observers and members of Congress saw DI as ripe for reform. To others, DI was a key element of the social safety net that should be expanded and whose major problem was simply a need for more money. To some, it was both.
Three years later, the threat of trust fund depletion has receded. Official projections made in mid-2018 showed adequate funding for DI until 2032, nearly a decade beyond the previous projections. The principle reason for the improved outlook was a huge drop in applications, some an anticipated consequence of economic recovery, and some a startling surprise. Projections would have been rosier still had the Social Security actuaries been willing to assume that the application drop would endure for more than a few years, a step they decided not to take until they better understood why the flow of DI applications had slackened.
Despite the abrupt end of the 2015 funding crisis, most of the other problems with DI that existed three years ago, persist undiminished.
With respect to administration, most DI applications are handled relatively quickly, but the quarter of applicants who appeal denial of benefits must wait even longer today for a hearing before an Administrative Law Judge (ALJ) than they did three years ago and three times longer than they had to wait in 1990. SSA administrative budgets have remained stagnant even as the Great Recession and retiring baby-boomers have inflated workloads. The agency has faced problems in hiring a sufficient number of ALJs and support staff. In the wake of the recession-related bulge in applications, an avalanche of cases descended sitting ALJs with inadequate staff support, operating under clumsy and time-consuming administrative ... By Henry J. Aaron
Just three years ago in 2015, the Social Security Disability Insurance (DI) program was in a financial nose-dive. Current revenues covered only about 80 percent of outlays. Scheduled benefits could be paid only ... https://www.brookings.edu/media-mentions/20181209-boston-herald-celia-belin/20181209 Boston Herald Celia Belinhttp://webfeeds.brookings.edu/~/584962302/0/brookingsrss/topics/laborpolicy~Boston-Herald-Celia-Belin/
Sun, 09 Dec 2018 20:50:13 +0000https://www.brookings.edu/?post_type=media-mention&p=552315

The Bureau of Labor Statistics (BLS) employment report, released on December 7, 2018, shows that 155,000 jobs were gained in November 2018. Each month, I report results from three alternative projections, each of which was calculated using methodology outlined in my past research published in the Brookings Papers on Economic Activity.

You can read more about the methodology below. Here are my alternate projections for November 2018:

METHODOLOGY

Monthly job gains and losses can indicate how the economy is doing once they are corrected to account for the pattern the BLS already expects in a process called seasonal adjustment. The approach for this seasonal adjustment that is presently used by the BLS puts very heavy weight on the current and last two years of data in assessing what are the typical patterns for each month. In my 2013 Brookings Paper “Unseasonal Seasonals?” I argue that a longer window should be used to estimate seasonal effects. I find that using a different seasonal filter, known as the 3×9 filter, produces better results and more accurate forecasts by emphasizing more years of data. The 3×9 filter spreads weight over the most recent six years in estimating seasonal patterns, which makes them more stable over time than the current BLS seasonal adjustment method.

In addition to seasonal effects, abnormal weather can also affect month-to-month fluctuations in job growth. In my 2015 Brookings Paper with Michael Boldin, “Weather-Adjusting Economic Data,” we implement a statistical methodology for adjusting employment data for the effects of deviations in weather from seasonal norms. This is distinct from seasonal adjustment, which only controls for the normal variation in weather across the year. We use several indicators of weather, including temperature and snowfall.

The alternative seasonal and weather adjustment performs the alternative seasonal adjustment and the weather adjustment jointly, adjusting for weather effects while also using a longer data window.

Highlights from past months

Friday, November 2, 2018 — There were two hurricanes in the past two months: Hurricane Florence in September and Hurricane Michael in October. It is important to note that the weather adjustment does not incorporate the effects of hurricanes. Working with national data, Michael Boldin and I found it difficult to estimate hurricane effects with reasonable precision. Thus, we did not include a hurricane factor in our model.

Hurricane Florence lowered employment in September, and as the Carolinas bounced back from this event, it likely boosted the change in employment from September to October. Hurricane Michael lowered the payrolls change from September to October. In terms of relative magnitudes, Hurricane Florence did substantially more damage. But the way that the BLS defines the employment data, a worker is counted as employed for the month if he or she works at any point in the pay period bracketing the 12th. Hurricane Florence made landfall on September 14th, while Hurricane Michael made landfall on October 10th. All else equal, the within-month timing of the two hurricanes makes Hurricane Michael more likely to impact employment in the way that the BLS defines it.

There are a few clues in this morning’s data that suggest the overall direction and magnitude of the hurricane effect in this morning’s data. Absences from work due to weather in the Current Population Survey fell in October to 198,000 from an elevated level in September, though this is still a high number of work absences. Employment in food services and drinking places climbed by 33,000 and is consistent with a sizeable positive hurricane effect. These facts would suggest that bounceback from Hurricane Florence is the dominant effect in this morning’s jobs numbers.

Based on the available information, a reasonable estimate might be that payrolls growth in October was boosted by about 30,000-40,000 from the bounceback from Hurricane Florence net of the negative effects of Hurricane Michael. We will know more when the state and local level data are released on November 17th.

In any case, smoothing through these weather effects, the pace of jobs growth remains very strong. Even with continued recovery in prime-age labor force participation, such a pace of jobs growth will, if continued for much longer, push unemployment down to extremely low levels.

Friday, October 5, 2018 — Hurricane Florence struck the Carolinas in September. It is important to note that the weather adjustment does not incorporate the effects of hurricanes. Working with national data, Michael Boldin and I found it difficult to estimate hurricane effects with reasonable precision. Thus, we did not include a hurricane factor in our model. The fact that employment in food services and drinking places declined by 18,000 is consistent with some hurricane effect. However, the effect of Hurricane Florence on the payrolls total for September is likely to be modest. A worker is counted as employed for the month if he or she works at any point in the pay period bracketing the 12th, and Hurricane Florence did not make landfall until Saturday September 14th. While this could cause some workers to not be employed for the entire previous week, that is likely to be rare. Overall, the jobs report was weaker than the recent trend and that cannot be explained solely or even largely by the hurricane. A reasonable guess based on the available information is that Hurricane Florence lowered jobs growth in September by about 25,000. However, the trend in jobs growth over the last 6 months was not really sustainable. Moreover, month-to-month data are very noisy and so it would be premature to read too much into this morning’s numbers.

Friday, April 6, 2018 — During the month of March, four Nor’easters battered the East Coast in a span of three weeks, two of which (Quinn and Skylar) registered as “notable” or “significant” on the Regional Snowfall Index. This, coupled with colder-than-average temperatures, results in a non-trivial weather effect of –41,000 jobs, resulting in a Seasonal and Weather Adjustment above the BLS Official number. This is the time of year when weather effects in employment data tend to be largest. This estimated weather effect is meaningful, but not especially large. Overall, the March number was notably weaker than the recent trend. Part of this owes to somewhat poor weather, but even after adjusting for this, it represents a slowdown in the pace of employment growth.

Friday March 9, 2018 — According to the Alternative Seasonal Adjustment, the economy added 341,000 jobs in February, even stronger than the BLS Official total of 313,000. The BLS methodology allows a strong month’s data to pull up the estimated seasonal factor substantially. The Alternative Seasonal Adjustment does this to a lesser extent. Hence, the Alternative Seasonal Adjustment shows an even stronger acceleration in seasonally adjusted jobs numbers.

Friday, February 2, 2018 — There was one notable snowstorm in the month of January that could have affected employment—Winter Storm Grayson, which produced blizzard-like conditions in parts of the Northeast, and winter weather advisories as far south as Florida. However, the overall weather effect is small, at +1,000 jobs. Although there was snow in January, this is relatively normal, and temperatures were in line with historical averages. The point of the weather adjustment is to correct for unusual weather. On net, the weather was not at all unusual.

Friday, December 8, 2017 — Today’s estimates for the effects of weather do not take into account hurricanes Harvey and Irma, which clearly had large effects on the previous two jobs reports. The rebuilding effort, coupled with establishments resuming normal operations, likely somewhat boosted jobs growth in November. However, looking at state-level employment numbers for September and October, employment in Texas and Florida more than recouped their September losses in October. Perhaps this is in part because Hurricane Irma ended up tracking farther west than expected. Many establishments may have closed, but not been greatly damaged, and thus resumed normal operations fairly quickly. Therefore, I believe the impact of the hurricanes on the November data was negligible.

Friday, November 3, 2017 — Hurricanes Harvey and Irma substantially impacted the jobs numbers for September. At the time of last month’s jobs report, the BLS reported a loss of 33,000 jobs in September, the first net job loss in more than 5 years. This morning, the BLS has revised September’s number up, from –33,000 to +18,000. Based on state-level jobs numbers that came out on October 20 and other information, including the fact the September jobs numbers were revised upward by BLS, I estimate that these two hurricanes lowered the September employment growth by about 150,000. In past comparable episodes, the jobs numbers have bounced back by about two-thirds in the next month. Hence, I estimate the October employment numbers were inflated by about 100,000 from the bounce-back effect. Adjusting the BLS Official numbers for September and October, the estimated hurricane effect gives an underlying pace of jobs growth of 168,000 for September and 161,000 for October, which is close to the average monthly gains from the previous 12 months. The rebound from the hurricanes and the rebuilding effort should again be a positive factor for jobs growth in next month’s report.

Friday, October 6, 2017 — Hurricane Harvey made landfall in Texas on August 25, and proceeded to flood the city of Houston—America’s 4th largest city—for the next several days. However, because data for the August establishment survey were largely collected before the storm, Harvey had no material effect on August’s employment numbers, but did affect employment for September. Hurricane Irma made landfall in Florida on September 10, which is right around the time of the September establishment survey. Preliminary damage estimates are around $100 billion for Hurricane Harvey and $65 billion for Hurricane Irma, which together puts the damage on par with Hurricane Katrina in 2005. State-level data for initial jobless claims spiked by about 70,000 in Texas and Florida combined. Initial jobless claims have been a reasonable indicator of employment losses for past hurricanes, although it is important to remember that undocumented immigrants can be included in the establishment survey, but cannot claim unemployment insurance. Preliminary estimates by the Federal Reserve Bank of Dallas suggest that Harvey could result in a decline in Texas payrolls of around 40,000 in September, rather an increase of around 30,000 jobs that was otherwise predicted—a 70,000 effect for Texas alone. Employment in Louisiana fell by over 100,000 in the wake of Hurricane Katrina in September 2005, which has resulted in about the same damage as hurricanes Harvey and Irma combined. Taking all this into account, a reasonable estimate of the combined effect of hurricanes Harvey and Irma on September’s employment data is roughly –100,000 jobs, which swamps the typical seasonal and weather effects. Adjusting the BLS Official number with this estimated hurricane effect yields an underlying pace of jobs growth of 67,000. Two final points about the effects of hurricanes on employment numbers must be made. The first is that hurricanes disrupt the physical technology used to collecting the employment data. As a result, future data revisions may be larger than usual. Second is that employment is expected to bounce back as the hurricane cleanup process gets underway, and so we should expect a positive bump for October and November’s jobs data. The bottom line is that September’s is a weak jobs report, but the weakness is exaggerated by the effect of the hurricanes.

Friday, September 1, 2017 — Hurricane Harvey had no discernible effect on the employment data for August. The category 4 hurricane made landfall in Texas on August 26, and proceeded to flood the city of Houston—America’s 4th largest city—for the next several days, causing damage to tens of thousands of homes and forcing many residents to seek shelter. Roads were flooded, and most residents of Houston and the surrounding towns were unable to get to work in the final week of August. However, the establishment survey, which is used to count the number of people employed, was based on data largely collected before the storm. Indeed, the BLS employment release notes that the “establishment survey data collection for this news release was largely completed prior to the storm, and collection rates were within normal ranges nationally and for the affected areas.” Moreover, given the definition of employment in the establishment survey, for the hurricane to affect employment one’s employer would have had to anticipate the hurricane by August 12, which is highly implausible. However, it is likely that the hurricane will affect future jobs numbers, as the economic disruption in the Houston area will be long lasting.

Friday, December 2, 2016 — According to the Alternative Seasonal Adjustment, the economy added 213,000 jobs in November, 35,000 more than the BLS Official total of 178,000. November 2015 was a very strong jobs report and this causes the BLS’s seasonal factor to be moved up. Consequently, this has an echo effect of making the seasonally adjusted numbers weaker in November 2016. My seasonal adjustment averages over more years, and so the echo effect is smaller. This is apparently the reason why my Alternative Seasonal Adjustment gives a somewhat stronger number for November 2016.

Friday, May 6, 2016 — Unseasonable weather can fully explain the weak jobs report for April. The Guardian reported this morning with the headline, “US economy adds just 160,000 jobs in April – further sign of slowdown.” I would argue, however, that the jobs report for April was actually slightly better than expected. Let me explain: April’s jobs gains, released this morning, indicate that the U.S. added only 160,000 new jobs, roughly 40,000 fewer than expected. But this estimate does not account for the effect of unusual weather, which was significant for April. While weather was close to normal in April, it had been milder than normal in each month of the winter. Hence, the effect of weather inflated the level of employment upward through March, and an unwinding of the effect distorted the change in employment from March to April downwards. As a result, there was a sizeable “bounceback” in the data. After adjusting for the effects of unusual weather, employment growth was substantially more robust, at 229,000 jobs. I would argue that all of the slowdown that people are talking about for April is explained by weather. Seasonally adjusted, construction employment was basically flat, a tell-tale sign that weather was a drag on the data.

The author did not receive financial support from any firm or person for this article or from any firm or person with a financial or political interest in this article. He is currently not an officer, director, or board member of any organization with an interest in this article.

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By Jonathan Wright
The Bureau of Labor Statistics (BLS) employment report, released on December 7, 2018, shows that 155,000 jobs were gained in November 2018. Each month, I report results from three alternative projections, each of which was calculated using methodology outlined in my past research published in the Brookings Papers on Economic Activity.
You can read more about the methodology below. Here are my alternate projections for November 2018:
- Alternative Seasonal Adjustment (Alt. SA): 167,000 jobs added in November 2018. - Seasonal and Weather Adjustment (SWA): 140,000 jobs added in November 2018. (Weather effect: +15,000 jobs) - Alternative Seasonal and Weather Adjustment (Alt. SWA): 153,000 jobs added in November 2018.
METHODOLOGY
CALCULATING THE ALTERNATIVE SEASONAL ADJUSTMENT
Monthly job gains and losses can indicate how the economy is doing once they are corrected to account for the pattern the BLS already expects in a process called seasonal adjustment. The approach for this seasonal adjustment that is presently used by the BLS puts very heavy weight on the current and last two years of data in assessing what are the typical patterns for each month. In my 2013 Brookings Paper Unseasonal Seasonals?” I argue that a longer window should be used to estimate seasonal effects. I find that using a different seasonal filter, known as the 3×9 filter, produces better results and more accurate forecasts by emphasizing more years of data. The 3×9 filter spreads weight over the most recent six years in estimating seasonal patterns, which makes them more stable over time than the current BLS seasonal adjustment method.
CALCULATING THE SEASONAL AND WEATHER ADJUSTMENT
In addition to seasonal effects, abnormal weather can also affect month-to-month fluctuations in job growth. In my 2015 Brookings Paper with Michael Boldin, “Weather-Adjusting Economic Data,” we implement a statistical methodology for adjusting employment data for the effects of deviations in weather from seasonal norms. This is distinct from seasonal adjustment, which only controls for the normal variation in weather across the year. We use several indicators of weather, including temperature and snowfall.
COMBINING THE ALTERNATIVE SEASONAL AND WEATHER ADJUSTMENTS
The alternative seasonal and weather adjustment performs the alternative seasonal adjustment and the weather adjustment jointly, adjusting for weather effects while also using a longer data window.
Highlights from past months
Friday, November 2, 2018 — There were two hurricanes in the past two months: Hurricane Florence in September and Hurricane Michael in October. It is important to note that the weather adjustment does not incorporate the effects of hurricanes. Working with national data, Michael Boldin and I found it difficult to estimate hurricane effects with reasonable precision. Thus, we did not include a hurricane factor in our model.
Hurricane Florence lowered employment in September, and as the Carolinas bounced back from this event, it likely boosted the change in employment from September to October. Hurricane Michael lowered the payrolls change from September to October. In terms of relative magnitudes, Hurricane Florence did substantially more damage. But the way that the BLS defines the employment data, a worker is counted as employed for the month if he or she works at any point in the pay period bracketing the 12th. Hurricane Florence made landfall on September 14th, while Hurricane Michael made landfall on October 10th. All else equal, the within-month timing of the two hurricanes makes Hurricane Michael more likely to impact employment in the way that the BLS defines it.
There are a few clues in this morning’s data that suggest the overall direction and magnitude of the hurricane effect in this morning’s data. Absences from work due to ... By Jonathan Wright
The Bureau of Labor Statistics (BLS) employment report, released on December 7, 2018, shows that 155,000 jobs were gained in November 2018. Each month, I report results from three alternative projections, each of which was ... https://www.brookings.edu/blog/up-front/2018/12/04/how-the-great-recession-hurt-the-middle-class-twice/How the Great Recession hurt the middle class—twicehttp://webfeeds.brookings.edu/~/583842462/0/brookingsrss/topics/laborpolicy~How-the-Great-Recession-hurt-the-middle-class%e2%80%94twice/
Tue, 04 Dec 2018 19:26:13 +0000https://www.brookings.edu/?p=551125

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By Brad Hershbein

The economy looks to be on a roll, if recent releases of economic indicators are anything to go by. The unemployment rate is near a 50-year low. Job growth has been averaging over 200,000 per month. Inflation-adjusted median household income has been climbing sharply for the past three years.

The numbers suggest that the Great Recession is finally behind us. But some people aren’t feeling it, especially if they happen to be in the middle class. Indeed, recent reports have suggested some lingering middle malaise may reflect an urban versus rural divide, or a split of superstar cities versus everyone else. What if the Great Recession did not just affect some areas of the country worse than others, it also affected the middle class differently than the top or bottom in those areas?

Weak wage growth in the middle

The figure below shows real hourly wage growth for each quintile of the wage distribution between 2006 and 2016, a period bracketing the Great Recession:

While wages are up for everyone, the gains have been far from equal. It is not too surprising that wage growth was highest in the top quintile—this element of economic polarization is now well known. Wage growth was also reasonably robust at the bottom, above 6 percent, as several minimum wage increases at the national and state levels took effect. However, wage growth in the middle quintiles, especially the second and third, was much weaker. The result is that wages at the bottom and middle have been pushed closer together, while wages at the top have pulled away from everyone else.

Middle class stagnation is in the worst-hit areas

But there is a geographical element to this story too. Some areas were hit harder than others in the Great Recession. The next figure shows wage growth across the distribution for areas hit most and least by the downturn (i.e., in the metropolitan statistical areas that had greater proportional employment losses during the recession and those that had smaller employment losses):

Wage growth in both the top quintile and the bottom quintile is remarkably similar in both kinds of city. But for the middle three quintiles, growth has lagged considerably in the areas that experienced a more severe recession. Indeed, for the second and third quintiles in the harder hit areas, wage growth averaged a paltry 0.3 percent a year, barely more than half the pace for the middle class in the less affected areas.

Double whammy for middle class in middle America

Nationally, middle-class workers have lost ground compared to earners at the bottom and the top. But middle-class workers in harder-hit areas also lost ground compared to their counterparts in areas less affected by the Great Recession. If you were unlucky enough to be in the middle class in places like Atlanta, Houston, or St. Louis, instead of Columbus, Kansas City, or San Antonio, the Great Recession hammered you twice. In these places at least, the lingering malaise is warranted.

Technical Note: I use Current Population Survey microdata to calculate hourly wages, adjusted for inflation, for workers in about 170 metropolitan statistical areas in two time periods: 2005–2007 and 2015–2017. (The 170 areas cover about 70 percent of the country’s workers.) For the first figure, I estimate the average hourly wage for each quintile, or fifth, of the distribution in each time period and then calculate the wage growth from the earlier period to the later period.

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By Brad Hershbein
The economy looks to be on a roll, if recent releases of economic indicators are anything to go by. The unemployment rate is near a 50-year low. Job growth has been averaging over 200,000 per month. Inflation-adjusted median household income has been climbing sharply for the past three years.
The numbers suggest that the Great Recession is finally behind us. But some people aren’t feeling it, especially if they happen to be in the middle class. Indeed, recent reports have suggested some lingering middle malaise may reflect an urban versus rural divide, or a split of superstar cities versus everyone else. What if the Great Recession did not just affect some areas of the country worse than others, it also affected the middle class differently than the top or bottom in those areas?
Weak wage growth in the middle
The figure below shows real hourly wage growth for each quintile of the wage distribution between 2006 and 2016, a period bracketing the Great Recession:
While wages are up for everyone, the gains have been far from equal. It is not too surprising that wage growth was highest in the top quintile—this element of economic polarization is now well known. Wage growth was also reasonably robust at the bottom, above 6 percent, as several minimum wage increases at the national and state levels took effect. However, wage growth in the middle quintiles, especially the second and third, was much weaker. The result is that wages at the bottom and middle have been pushed closer together, while wages at the top have pulled away from everyone else.
Middle class stagnation is in the worst-hit areas
But there is a geographical element to this story too. Some areas were hit harder than others in the Great Recession. The next figure shows wage growth across the distribution for areas hit most and least by the downturn (i.e., in the metropolitan statistical areas that had greater proportional employment losses during the recession and those that had smaller employment losses):
Wage growth in both the top quintile and the bottom quintile is remarkably similar in both kinds of city. But for the middle three quintiles, growth has lagged considerably in the areas that experienced a more severe recession. Indeed, for the second and third quintiles in the harder hit areas, wage growth averaged a paltry 0.3 percent a year, barely more than half the pace for the middle class in the less affected areas.
Double whammy for middle class in middle America
Nationally, middle-class workers have lost ground compared to earners at the bottom and the top. But middle-class workers in harder-hit areas also lost ground compared to their counterparts in areas less affected by the Great Recession. If you were unlucky enough to be in the middle class in places like Atlanta, Houston, or St. Louis, instead of Columbus, Kansas City, or San Antonio, the Great Recession hammered you twice. In these places at least, the lingering malaise is warranted.
Technical Note: I use Current Population Survey microdata to calculate hourly wages, adjusted for inflation, for workers in about 170 metropolitan statistical areas in two time periods: 2005–2007 and 2015–2017. (The 170 areas cover about 70 percent of the country’s workers.) For the first figure, I estimate the average hourly wage for each quintile, or fifth, of the distribution in each time period and then calculate the wage growth from the earlier period to the later period. By Brad Hershbein
The economy looks to be on a roll, if recent releases of economic indicators are anything to go by. The unemployment rate is near a 50-year low. Job growth has been averaging over 200,000 per month. Inflation-adjusted median ... https://www.brookings.edu/blog/up-front/2018/11/29/democrats-have-the-house-now-they-need-an-economic-agenda-that-gives-americans-better-paying-jobs/Democrats have the House, now they need an economic agenda that gives Americans better-paying jobshttp://webfeeds.brookings.edu/~/582914624/0/brookingsrss/topics/laborpolicy~Democrats-have-the-House-now-they-need-an-economic-agenda-that-gives-Americans-betterpaying-jobs/
Thu, 29 Nov 2018 19:31:12 +0000https://www.brookings.edu/?p=550472

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By Isabel V. Sawhill

Democrats have re-taken the House, and already we’re hearing calls for investigations and greater accountability. These are fraught political times, to be sure, and I join others in demanding answers. But to the new members of the House prioritizing their long to-do lists, I’d like to offer some caution: If serving as a check on President Trump is all you manage to accomplish between now and 2020, your electoral victory may ultimately disappoint those who voted you into office, shrinking rather than growing your base and further increasing the public’s cynicism about government.

The policy message needs to be simple. It should be about jobs.

Work is a strong and unifying value in America. Work is not only what people do to earn a living but what they do because it gives them a sense of accomplishment, of contributing, and feeling like valued members of their society. We need a new social contract that says if you work you should have a shot at the American dream—the kind of training and pay package that will enable you to earn a good life. That means a private sector that treats its workers like team members by training and rewarding them in line with the profits they help to create. Instead of providing huge windfalls to corporations and the wealthy, and hoping they will trickle down to workers, let’s accomplish the same objective more directly. We can harness the private sector’s unique knowledge of skills in demand with tax incentives that encourage them to partner with community colleges to build those skills. We can fund apprenticeships. We can encourage companies to link worker pay to company performance and to share ownership with their workers. Unions used to stand up for workers; they’ve been weakened and that’s a problem. But instead of hoping we can restore the past, we need a new model of corporate responsibility energized by a revised tax law.

We need a new social contract that says if you work you should have a shot at the American dream—the kind of training and pay package that will enable you to earn a good life.

We must also recognize that most of the middle class now depends on two earners. These families face not just a money squeeze but a time squeeze. They need child care, time off for caregiving, and for lifelong learning.

In addition, we should reduce taxes, including payroll taxes, for the bottom half, thereby sending a message to working and middle class America that we have their back—that boosting their paychecks is a top priority.

By enacting a VAT or by taxing large accumulations of wealth at the very top, along with some revisions to the 2017 tax law, all of this is possible. In fact, it’s more than possible—it’s what people want.

Earlier this year, I took some policy ideas on the road, talking to middle and working-class Americans in three U.S. cities as part of a book I just completed—The Forgotten Americans. Overwhelmingly, I found Americans are most concerned with their low pay and poor benefits. They noted that there are plenty of jobs out there, and that jobs are easier than ever to find because of the Internet (and a strong economy). The problem, they insist, is that there aren’t enough good jobs. As one participant said, “I can find a job easily at McDonald’s or Taco Bell,” but “if I don’t have that schooling behind me” I can’t do better.

We must stop obsessing about the fact that slightly higher taxes on the wealthy and on corporations might reduce GDP growth by some paltry amount. They likely won’t and even if they did GDP growth is a false god in the face of a faltering democracy. Supply-side economics has been tried under three Republican presidents and it has failed. Without a robust effort to reskill America and create decently-paid jobs, we are doomed to become a second-class society where a lack of education and training makes us uncompetitive, and deindustrialization, opioids, and weak family ties destroy entire communities.

Yes, we need to address climate change, affordable health care, immigration reform, and other issues, but providing decent-paying jobs should be the top priority. In focus groups I have done with “the forgotten Americans” that’s what they say they want and that’s what it will take to restore their faith in government.

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By Isabel V. Sawhill
Democrats have re-taken the House, and already we’re hearing calls for investigations and greater accountability. These are fraught political times, to be sure, and I join others in demanding answers. But to the new members of the House prioritizing their long to-do lists, I’d like to offer some caution: If serving as a check on President Trump is all you manage to accomplish between now and 2020, your electoral victory may ultimately disappoint those who voted you into office, shrinking rather than growing your base and further increasing the public’s cynicism about government.
The policy message needs to be simple. It should be about jobs.
Work is a strong and unifying value in America. Work is not only what people do to earn a living but what they do because it gives them a sense of accomplishment, of contributing, and feeling like valued members of their society. We need a new social contract that says if you work you should have a shot at the American dream—the kind of training and pay package that will enable you to earn a good life. That means a private sector that treats its workers like team members by training and rewarding them in line with the profits they help to create. Instead of providing huge windfalls to corporations and the wealthy, and hoping they will trickle down to workers, let’s accomplish the same objective more directly. We can harness the private sector’s unique knowledge of skills in demand with tax incentives that encourage them to partner with community colleges to build those skills. We can fund apprenticeships. We can encourage companies to link worker pay to company performance and to share ownership with their workers. Unions used to stand up for workers; they’ve been weakened and that’s a problem. But instead of hoping we can restore the past, we need a new model of corporate responsibility energized by a revised tax law.
We need a new social contract that says if you work you should have a shot at the American dream—the kind of training and pay package that will enable you to earn a good life.
We must also recognize that most of the middle class now depends on two earners. These families face not just a money squeeze but a time squeeze. They need child care, time off for caregiving, and for lifelong learning.
In addition, we should reduce taxes, including payroll taxes, for the bottom half, thereby sending a message to working and middle class America that we have their back—that boosting their paychecks is a top priority.
By enacting a VAT or by taxing large accumulations of wealth at the very top, along with some revisions to the 2017 tax law, all of this is possible. In fact, it’s more than possible—it’s what people want.
Earlier this year, I took some policy ideas on the road, talking to middle and working-class Americans in three U.S. cities as part of a book I just completed—The Forgotten Americans. Overwhelmingly, I found Americans are most concerned with their low pay and poor benefits. They noted that there are plenty of jobs out there, and that jobs are easier than ever to find because of the Internet (and a strong economy). The problem, they insist, is that there aren’t enough good jobs. As one participant said, “I can find a job easily at McDonald’s or Taco Bell,” but “if I don’t have that schooling behind me” I can’t do better.
We must stop obsessing about the fact that slightly higher taxes on the wealthy and on corporations might reduce GDP growth by some paltry amount. They likely won’t and even if they did GDP growth is a false god in the face of a faltering democracy. Supply-side economics has been tried under three Republican presidents and it has failed. Without a robust effort to reskill America and create decently-paid jobs, we are doomed to become a second-class society ... By Isabel V. Sawhill
Democrats have re-taken the House, and already we’re hearing calls for investigations and greater accountability. These are fraught political times, to be sure, and I join others in demanding answers.https://www.brookings.edu/opinions/when-the-next-recession-hits-will-unemployment-benefits-be-generous-enough/When the next recession hits, will unemployment benefits be generous enough?http://webfeeds.brookings.edu/~/582685464/0/brookingsrss/topics/laborpolicy~When-the-next-recession-hits-will-unemployment-benefits-be-generous-enough/
Wed, 28 Nov 2018 16:27:44 +0000https://www.brookings.edu/?post_type=opinion&p=550150

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By Gary Burtless

From the perspective of workers, the U.S. unemployment insurance (UI) system is one of the least generous in the industrialized world. This is not because weekly payments offered by the program are unusually low. In the case of American workers who earn average or below-average pay, the percent of lost earnings replaced by UI benefits is about average among the rich countries. The distinctive feature of the U.S. system is that benefits do not last very long. In a typical state, a newly jobless worker is eligible to collect benefits for at most six months. In nine states, benefit durations are even shorter than that. In Florida and Missouri, new beneficiaries are currently eligible to receive at most three months of benefits. Is three months enough? Many rich countries offer combinations of unemployment benefits and unemployment assistance that last for a year or longer. Very few offer benefits as short as six months.

Before the Great Recession, it was rare for states to limit jobless benefits to less than six months. The fact that nine states now do so represents a notable benefit cut for the U.S. program. Little evidence indicates that states shortened the maximum benefit duration based on careful consideration of the pros and cons of different benefit limits. The main reason states took this step was to reduce the cost of their programs and keep employer contributions low. Did the cuts improve workers’ well-being? Did they yield better job search outcomes? It’s hard to say, but these were minor considerations in the policy shift.

The Great Recession certainly drove up program costs. Benefit outlays under regular state UI programs increased more than 145 percent between 2007 and 2009. States reacted differently to the resulting cost pressure. Many borrowed funds from the federal government to pay for benefits when their own state unemployment reserves were depleted. Federal law requires states to repay the loans in a timely fashion. If they are not repaid, the federal government imposes a penalty tax rate on a state’s employers until the loan is repaid. The tax penalty increases in each successive year that a loan remains unpaid.

Naturally, employers in a state object to payroll tax hikes, especially in the midst of a recession. They lobby state legislators to adopt policies that minimize the need for higher taxes. The rout of Democrats and the triumph of conservatives in the 2010 elections made state lawmakers receptive to employers’ pleas. In a fifth of states, UI laws were amended to reduce the potential duration of workers’ UI benefits. (Only one state has rescinded the cut.)

The unemployment insurance program is not a single national system. It is a collection of 50 state systems, each of which must follow some basic federal guidelines. States have considerable latitude to determine their own payroll taxes, payment formulas, and benefit limits. One result is that there are wide differences in the generosity of different state programs. In 2017, only about a quarter of the nation’s unemployed were covered by UI claims filed under regular state programs. However, this fraction varied widely from state to state, ranging from 10 percent of the unemployed in North Carolina up to almost half the unemployed in Massachusetts.

Part of this coverage gap is due to differences in the characteristics of the unemployed in different states. First-time job seekers, the long-term unemployed, most unemployed workers who quit their jobs, and workers who have spotty work records are generally ineligible for benefits. However, much of the difference in state coverage rates is traceable to differences in the generosity of states’ UI programs. Oregon and Florida had virtually identical unemployment rates in 2017, but while one-third of Oregon’s unemployed collected a UI check in that year, just 11 percent of the unemployed did so in Florida.

The least generous feature of the U.S. system has become even less generous, with scant discussion of the implications for workers’ well-being and for macroeconomic stabilization.

The cutbacks in potential benefit duration are clearly linked to drops in the percentage of unemployed who collect a UI check. The Labor Department calculates the UI recipiency rate as the fraction of the unemployed who are covered by a continued claim for regular UI benefits. Between 2006-2007 and 2016-2017, the UI recipiency rate in the nation as a whole fell a bit less than one-quarter. The three states with the biggest proportional drops in their recipiency rates were North Carolina, Florida, and Georgia. Each of these states saw their recipiency rates fall by at least half. Each of these states also cut the maximum duration of UI benefits. North Carolina and Florida now limit UI benefit payouts to 12 weeks; Georgia limits benefits to 14 weeks. All but one of the states cutting benefit durations after 2010 saw bigger-than-average drops in their UI recipiency rates.

Five of the nine states that reduced benefit durations linked their cuts to changes in the state unemployment rate. If the state unemployment rate should rise, the maximum duration of UI benefits will also increase. While this link makes sense, the fact remains that at most levels of unemployment—including today’s—the maximum duration of benefits is substantially lower than it was when unemployment rates were similar in the 1960s and late 1990s.

The goal of the U.S. unemployment insurance is to replace workers’ earnings that are lost as a result of layoffs. The income replacement provided by UI is only partial and temporary. With very little debate, states have moved to limit the duration of UI benefits below the duration that was standard in the five decades before 2010. The least generous feature of the U.S. system has become even less generous, with scant discussion of the implications for workers’ well-being and for macroeconomic stabilization. The aim of the shift has plainly been to reduce payroll tax burdens on employers. Unlike other safety net programs, however, the cost of UI has been shrinking over time rather than growing. Measured as a percentage of money wages, the cost of state-funded UI benefit payments hit a historical low last year.

In recent recessions, actions by Congress have offset the cumulative impacts of state-level cuts in unemployment insurance. The measures temporarily boost UI benefit durations and permit the unemployed to draw benefits for longer than six months, sometimes for as long as 23 months. These special federal programs have paid for an increasing percentage of UI benefits in recent recessions. By enacting temporary unemployment compensation programs fully funded by the federal government and temporarily subsidizing state extended UI benefit programs, Congress has preserved UI’s status as the nation’s most important counter-cyclical spending program. However, this achievement has depended on timely Congressional action. In a future recession, a divided Congress might delay or fail to establish a temporary extended benefit program. If that happens, past and future cuts in state UI programs will exact a toll. The UI system will deliver less counter-cyclical stimulus and weaker income support than has been the case in past recessions.

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By Gary Burtless
From the perspective of workers, the U.S. unemployment insurance (UI) system is one of the least generous in the industrialized world. This is not because weekly payments offered by the program are unusually low. In the case of American workers who earn average or below-average pay, the percent of lost earnings replaced by UI benefits is about average among the rich countries. The distinctive feature of the U.S. system is that benefits do not last very long. In a typical state, a newly jobless worker is eligible to collect benefits for at most six months. In nine states, benefit durations are even shorter than that. In Florida and Missouri, new beneficiaries are currently eligible to receive at most three months of benefits. Is three months enough? Many rich countries offer combinations of unemployment benefits and unemployment assistance that last for a year or longer. Very few offer benefits as short as six months.
Before the Great Recession, it was rare for states to limit jobless benefits to less than six months. The fact that nine states now do so represents a notable benefit cut for the U.S. program. Little evidence indicates that states shortened the maximum benefit duration based on careful consideration of the pros and cons of different benefit limits. The main reason states took this step was to reduce the cost of their programs and keep employer contributions low. Did the cuts improve workers’ well-being? Did they yield better job search outcomes? It’s hard to say, but these were minor considerations in the policy shift.
The Great Recession certainly drove up program costs. Benefit outlays under regular state UI programs increased more than 145 percent between 2007 and 2009. States reacted differently to the resulting cost pressure. Many borrowed funds from the federal government to pay for benefits when their own state unemployment reserves were depleted. Federal law requires states to repay the loans in a timely fashion. If they are not repaid, the federal government imposes a penalty tax rate on a state’s employers until the loan is repaid. The tax penalty increases in each successive year that a loan remains unpaid.
Naturally, employers in a state object to payroll tax hikes, especially in the midst of a recession. They lobby state legislators to adopt policies that minimize the need for higher taxes. The rout of Democrats and the triumph of conservatives in the 2010 elections made state lawmakers receptive to employers’ pleas. In a fifth of states, UI laws were amended to reduce the potential duration of workers’ UI benefits. (Only one state has rescinded the cut.)
The unemployment insurance program is not a single national system. It is a collection of 50 state systems, each of which must follow some basic federal guidelines. States have considerable latitude to determine their own payroll taxes, payment formulas, and benefit limits. One result is that there are wide differences in the generosity of different state programs. In 2017, only about a quarter of the nation’s unemployed were covered by UI claims filed under regular state programs. However, this fraction varied widely from state to state, ranging from 10 percent of the unemployed in North Carolina up to almost half the unemployed in Massachusetts.
Part of this coverage gap is due to differences in the characteristics of the unemployed in different states. First-time job seekers, the long-term unemployed, most unemployed workers who quit their jobs, and workers who have spotty work records are generally ineligible for benefits. However, much of the difference in state coverage rates is traceable to differences in the generosity of states’ UI programs. Oregon and Florida had virtually identical unemployment rates in 2017, but while one-third of Oregon’s unemployed collected a UI check in that year, just 11 percent of the unemployed did so in Florida.
The ... By Gary Burtless
From the perspective of workers, the U.S. unemployment insurance (UI) system is one of the least generous in the industrialized world. This is not because weekly payments offered by the program are unusually low.https://www.brookings.edu/blog/up-front/2018/11/16/wessels-economic-update-can-the-unemployment-rate-fall-too-low/Wessel’s Economic Update: Can the unemployment rate fall too low?http://webfeeds.brookings.edu/~/580678214/0/brookingsrss/topics/laborpolicy~Wessels-Economic-Update-Can-the-unemployment-rate-fall-too-low/
Fri, 16 Nov 2018 20:22:30 +0000https://www.brookings.edu/?p=548577

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By David Wessel

The unemployment rate—the percentage of Americans 16 and older who are looking for work and can’t find a job—is down to 3.7 percent. The last time it was this low was October 1969. Richard Nixon was president.

Economic forecasters, for what it’s worth, see the unemployment rate continuing to fall toward an extraordinarily low 3.4 percent over the next year. Other measures of the job market, like the one that counts people who have given up looking for work and part-time workers who’d prefer full time jobs, are also at historically low levels.

Which raises a question: Can the unemployment rate fall too low?

To many of us, this is a jarring question. The more people working and the fewer people struggling to find jobs the better. Right? Sure, it’s a hassle for employers who find fewer applicants for their openings, and some of them might actually have to pay more, offer more attractive benefits or better working conditions, or even offer some more on-the-job training to get the workers they need—but that seems like a good deal for the overall economy.

So who is worried about too little unemployment? Well, some folks at the Federal Reserve for starters—and not because they are hard-hearted, nasty people. The Fed’s mandate is to achieve stable prices (which the Fed defines as 2 percent inflation) and maximum sustainable employment. Simply put, the Fed and many economists believe, based on history, that when unemployment falls below some threshold, wages and prices go up.

Now for most of the past decade, inflation was so far below the Fed’s 2 percent target that the Fed didn’t worry about this and kept interest rates extraordinarily low. But lately, inflation has been creeping towards that 2 percent target—and wages are beginning to rise, too (finally).

Simply put, the Fed and many economists believe, based on history, that when unemployment falls below some threshold, wages and prices go up.

The standard Fed story goes something like this: If unemployment gets too low and wages rise too much and inflation goes well above our target, we’ll have to respond by raising interest rates a lot and risking a recession. In this story, we’re all better off if the Fed gently raises interest rates, thereby slowing hiring just enough that the unemployment rate doesn’t fall too low. In Fedspeak, this is known as “a soft landing” and the Fed traditionally has trouble pulling this off.

But the art of central banking is to draw the right lessons from history, to avoid fighting the last war again, and to carefully look for how today’s economy is like the past, as well as how it’s different.

One thing that is certainly different today: Wages have been very, very slow to respond to falling unemployment rates. In part, that’s because the strong job market has drawn many workers off the sidelines—workers who weren’t counted as unemployed a couple of years ago because they weren’t looking for work. In part, that’s because globalization, technology, outsourcing, the gig economy, and the atrophying of unions have weakened the bargaining power of workers versus employers, so employers don’t have to raise wages like they once did. That recent history has led economists at the Fed, the Congressional Budget Office and elsewhere to move down their estimates of how low unemployment can go before it generates unwelcome inflation.

Twenty years ago, economists anticipated that wages would pick up if unemployment fell below 5 percent. Today’s consensus estimates of what’s known as the natural rate of unemployment—or NAIRU for “non-accelerating inflation rate of unemployment—are around 4.5 percent, which is, of course substantially above today’s 3.7 percent. The problem is that estimating the natural rate of unemployment is hard, particularly in real time. Which means it’s really hard to know how low unemployment can safely fall.

So the conversation at the Fed these days goes something like this: Most policymakers seem to agree that raising interest rates in December is wise. After all, interest rates remain very low given the strength of the economy. But there’s some disagreement about how fast the Fed should raise them next year.

One camp says that with unemployment headed below 3.5 percent, an unwelcome increase in inflation is inevitable and the Fed needs to be tough and do its job, not matter how unpopular. They need to slow hiring with several rate increases next year. After all, they say, the Fed already has allowed unemployment to drop below its best estimates of the natural rate.

The other camp, call it the wait-n-see camp, wants to be very cautious and move rates up very gently until wages and prices really respond to low unemployment and the vigor of the economy—especially since there are worrisome signs that global economic growth is slowing.

This is a judgment call, and ultimately it boils down to what risk the Fed is willing to take. Does it fear inflation so much that it’s willing to raise interest rates a lot, even if that risks prematurely curtailing hiring and wage increases? Or does it fear unemployment and hurting workers so much that it’s willing to risk inflation rising significantly above its target by holding off on rate increases? That’s the Fed’s big challenge for 2019.

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By David Wessel
The unemployment rate—the percentage of Americans 16 and older who are looking for work and can’t find a job—is down to 3.7 percent. The last time it was this low was October 1969. Richard Nixon was president.
Economic forecasters, for what it’s worth, see the unemployment rate continuing to fall toward an extraordinarily low 3.4 percent over the next year. Other measures of the job market, like the one that counts people who have given up looking for work and part-time workers who’d prefer full time jobs, are also at historically low levels.
Which raises a question: Can the unemployment rate fall too low?
To many of us, this is a jarring question. The more people working and the fewer people struggling to find jobs the better. Right? Sure, it’s a hassle for employers who find fewer applicants for their openings, and some of them might actually have to pay more, offer more attractive benefits or better working conditions, or even offer some more on-the-job training to get the workers they need—but that seems like a good deal for the overall economy.
So who is worried about too little unemployment? Well, some folks at the Federal Reserve for starters—and not because they are hard-hearted, nasty people. The Fed’s mandate is to achieve stable prices (which the Fed defines as 2 percent inflation) and maximum sustainable employment. Simply put, the Fed and many economists believe, based on history, that when unemployment falls below some threshold, wages and prices go up.
Now for most of the past decade, inflation was so far below the Fed’s 2 percent target that the Fed didn’t worry about this and kept interest rates extraordinarily low. But lately, inflation has been creeping towards that 2 percent target—and wages are beginning to rise, too (finally).
Simply put, the Fed and many economists believe, based on history, that when unemployment falls below some threshold, wages and prices go up.
The standard Fed story goes something like this: If unemployment gets too low and wages rise too much and inflation goes well above our target, we’ll have to respond by raising interest rates a lot and risking a recession. In this story, we’re all better off if the Fed gently raises interest rates, thereby slowing hiring just enough that the unemployment rate doesn’t fall too low. In Fedspeak, this is known as “a soft landing” and the Fed traditionally has trouble pulling this off.
But the art of central banking is to draw the right lessons from history, to avoid fighting the last war again, and to carefully look for how today’s economy is like the past, as well as how it’s different.
One thing that is certainly different today: Wages have been very, very slow to respond to falling unemployment rates. In part, that’s because the strong job market has drawn many workers off the sidelines—workers who weren’t counted as unemployed a couple of years ago because they weren’t looking for work. In part, that’s because globalization, technology, outsourcing, the gig economy, and the atrophying of unions have weakened the bargaining power of workers versus employers, so employers don’t have to raise wages like they once did. That recent history has led economists at the Fed, the Congressional Budget Office and elsewhere to move down their estimates of how low unemployment can go before it generates unwelcome inflation.
Twenty years ago, economists anticipated that wages would pick up if unemployment fell below 5 percent. Today’s consensus estimates of what’s known as the natural rate of unemployment—or NAIRU for “non-accelerating inflation rate of unemployment—are around 4.5 percent, which is, of course substantially above today’s 3.7 percent. The problem is that estimating the natural ... By David Wessel
The unemployment rate—the percentage of Americans 16 and older who are looking for work and can’t find a job—is down to 3.7 percent. The last time it was this low was October 1969. Richard Nixon was president.https://www.brookings.edu/podcast-episode/the-promise-of-community-colleges-as-pathways-to-high-quality-jobs/The promise of community colleges as pathways to high-quality jobshttp://webfeeds.brookings.edu/~/580235742/0/brookingsrss/topics/laborpolicy~The-promise-of-community-colleges-as-pathways-to-highquality-jobs/
Wed, 14 Nov 2018 22:13:34 +0000https://www.brookings.edu/?post_type=podcast-episode&p=548027

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By Elizabeth Mann, Martha Ross, Adrianna Pita

In this episode, Martha Ross, fellow in the Metropolitan Policy Program, and Elizabeth Mann Levesque, fellow with the Brown Center on Education Policy, discuss the important role that community colleges play in putting young adults on a pathway to higher-quality jobs and other strategies for improving economic outcomes for youth from lower-income and disadvantaged backgrounds.

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By Elizabeth Mann, Martha Ross, Adrianna Pita
In this episode, Martha Ross, fellow in the Metropolitan Policy Program, and Elizabeth Mann Levesque, fellow with the Brown Center on Education Policy, discuss the important role that community colleges play in putting young adults on a pathway to higher-quality jobs and other strategies for improving economic outcomes for youth from lower-income and disadvantaged backgrounds.
Show notes:
- Pathways to high-quality jobs for young adults - Improving community college completion rates by addressing structural and motivational barriers - Event: Pathways to high-quality jobs for young adults - How work-based learning connects students with mentors and experience - States equip employers to drive apprenticeship
Direct download this episode (mp3)
With thanks to audio producer Gaston Reboredo, Chris McKenna, Brennan Hoban, Fred Dews, Camilo Ramirez, and interns Churon Bernier and Tim Madden for additional support.
Listen to Intersections here, on Apple Podcasts, or now on Spotify. Send feedback email to intersections@brookings.edu, and follow us and tweet us at @policypodcasts on Twitter.
Intersections is part of the Brookings Podcast Network. By Elizabeth Mann, Martha Ross, Adrianna Pita
In this episode, Martha Ross, fellow in the Metropolitan Policy Program, and Elizabeth Mann Levesque, fellow with the Brown Center on Education Policy, discuss the important